Rehire a Retiree? Maybe Not.

It sounds like a win-win: Companies hire valued employees back to work as consultants in retirement, giving the business access to critical expertise and giving the worker a nice cash cushion without the demands of the full-time job.

Rehiring a retiree works when companies ensure they’ll share expertise.

Leonard, also a chief adviser to consulting firm Leonard-Barton Group, has spent much of her career studying how people share and transfer knowledge, and says that companies must find ways to ensure that employees don’t take critical expertise out the door with them after the last bit of cake is eaten at their retirement party.

And they need to figure it out fast. While more Americans claim to be delaying retirement, the prospect of a “tsunami” of baby-boomer retirements still looms.

Leonard has helped the GE Global Research Centers General Electric Co.’s industrial research laboratories, revamp some of its policies for retirees and near-retirees. The unit had been rehiring many retirees as consultants – paying them a high wage to do basically what they had been doing before, but without any requirement that they pass along the critical knowledge that GE needed. In 2009, the unit cut way back on retiree re-hires, instead nudging employees toward phased retirements offering flexible work schedules and specifically asking departing workers to teach and mentor younger employees.

Leonard spoke to At Work about why people hoard knowledge, and how employers can build knowledge-sharing into their organizations.

WSJ: Hiring retirees as consultants seems like a good move for companies that want to retain important skills and knowledge. What’s the problem with this model?

Leonard: The major issue in rehiring people is, what do you rehire them for? If you’re just bringing them back to do exactly what they did before, and in many cases paying them more, then you’re missing an opportunity to rebuild some of the capabilities you will inevitably lose when they finally do leave.

Often retirees have what we call deep smarts – that means business-critical, experience-based expertise, which often comes in the form of skills, diagnostics, problem solving, and pattern recognition. These capabilities have to be retained or rebuilt, so it’s short-sighted to simply bring retirees back and use them the way you always have, when instead you could be using them to pass on their deep smarts to others in the company.

WSJ: How does a company encourage this kind of knowledge-sharing?

Leonard: In some companies, it’s built into the culture. You can also institutionalize it by, for example, having a practice that employees are not promoted unless they have passed along their deep smarts to a successor. That’s a pretty strong incentive to share knowledge. If you don’t have the culture or the built-in structure for knowledge-sharing, you have to set up specific programs, or change the incentive system, which is what GE did.

WSJ: Why do employees resist sharing their expertise with colleagues and successors?

Leonard: Many experts hoard their knowledge because it gives them power. Yes, there’s also a payback to giving advice and help. But to teach someone else how to do what you do, that means you’re creating an alternative go-to person.

WSJ: So in other words, we all want to be irreplaceable?

Leonard: I’m not saying all experts do that, but in some cultures there’s a strong incentive to hoard expertise, and some personalities naturally prefer to be the go-to person. On the other hand, I know of experts who both enjoy teaching and are proud to leave a legacy in their company.

WSJ: What are some of the best ways to share knowledge?

Leonard: It’s not easy to transfer tacit knowledge. But there are ways to capture what an expert does, through tools that create a visual map of the key knowledge he or she has, or through clusters of interviews. We also use workshops where we give the expert and the successor tools to transfer the knowledge and teach them how to do it. These tools and processes take the place of structured apprenticeships, which many companies no longer have.

WSJ: You’ve written case studies about passing on skills by having workers shadow more experienced colleagues.

Leonard: That’s the gold standard. I’d follow you around, observe you, ask questions, and then practice those skills myself, maybe while partnered with you. But you can’t always do that because you may not have time, or be geographically in the same place. So there are other methods, most of which involve skillful interviewing. Not just the expert, but people around the expert who know what their deep smarts are, and who have observed and worked with the expert.

WSJ: Can’t you just ask a retiring expert to write up a document compiling what they know?

Leonard: Wouldn’t that be great? What you can capture in a document is usually rules of thumb, some stories, and some guidelines, but you’re only touching the very top surface of a person’s knowledge and skill. Furthermore, a lot of expertise is actually called into consciousness only when the expert is confronted with a particular problem or in a particular context.

About At Work

Written and edited by The Wall Street Journal’s Management & Careers group, At Work covers life on the job, from getting ahead to managing staff to finding passion and purpose in the office. Tips, questions? email us.